Shared ownership staircasing

7firearcade

Hi,

My partner and I own 50% of a shared ownership flat in London, which we bought last August for £135,000 (full property value of £270,000). We recently had it revalued with the intention of staircasing to 100%, and the RICS surveyor valued it at full property value of £360,000, meaning it has gained £90,000 in value since we bought.

By my calculations we now have roughly £60,000 in equity: our £15,000 deposit, plus £45,000 (50% of the total £90,000 uplift), plus whatever of our mortgage has been paid off.

I just called our mortgage provider to find out about getting a further advance to buy the remaining 50% and am a bit confused as to the amount we need to borrow. We obviously need to pay the housing association £180,000 (50% of £360,000). I had assumed that this would mean we only needed a mortgage of £120,000, as our £60,000 in equity could act as a 'deposit'. The bank seemed to think we needed a mortgage for the full £180,000, but didn't sound too confident??

Anyone have any ideas? Thanks a lot in advance, my head is spinning a bit with all of these numbers.

Cakeguts

The 60k is part of the first half that you own. First 50% is now 60k plus mortgage equals £180k The second half costs £180k to match what the first half is valued at so you need a £!80k mortgage to buy it.

Windofchange

Loads of examples. This one will give you an idea:

https://www.leavalleyhomes.co.uk/docs/default-source/default-document-library/staircasing-your-aldwyck-home.pdf?sfvrsn=0

As per the above, I think you misunderstand how this works. Your flat has appreciated in value and therefore you now owe the housing association £180k to buy the whole lot. Your equity doesn't come into it.

What strikes me with help to buy is if prices go up you lose - in your case to the tune of £45k, and if prices go down you lose through not getting back what you put in.

7firearcade

Thanks all, this makes sense!

Has anyone else decided to just overpay their mortgage instead?

poppy10_2

Windofchange wrote: »

What strikes me with help to buy is if prices go up you lose - in your case to the tune of £45k, and if prices go down you lose through not getting back what you put in.

Yep. This is why shared ownership is a scam

Murrey

Things may be different now. Some Housing Associations are highly geared and may welcome residents purchasing further shares, especially if they are also having to investment money buying out those in financial difficulty.

There are different rules for valuation, though these rules are designed to ensure a fair price is paid.

I am surprised by the rent issue. There are new guidelines for Housing Associations now and so it would be worth discussing with the new Tenant Services Authority.

It will be worth also looking into Stamp Duty. It depends what you did when you first bought, eg paid only on the share you bought or on the whole property. If the former you may be in for some bad news.

But in general it should be a good time to trade up, and attitudes should be different.

00ec25

given your misunderstanding of the fact you do need to borrow 180K in cash with which to pay the HA, as the poster above says, do you understand your SDLT (stamp duty) position?

Did you make a market value election when you originally purchased, or did you opt to pay in stages?

7firearcade

Hi, thanks for all responses.

Yes, we have spoken to solicitors who have advised of stamp duty liability in the region of £1800, not as bad as we had feared.

Shared ownership has certainly been an interesting experience and has it's pitfalls, as pointed out... it was a safe bet when we bought it as it was a reposession in a trendy area in London and grossly undervalued, hence the total gain in value of £90,000 in the space of the last 10 months. If we sold now we would walk away with 50% of that, and in these very specific circumstances I think it's been worth it for us. Otherwise I'm not sure there's much to commend, dealing with the housing association has been awful, hence the original confusion.

Now to decide whether it's worth buying the other half, as borrowing an additional £180,000 would stretch us, or just stick at 50%...